WHEN a disillusioned L S Lam left China for Hong Kong in 1977 after 20 years of attempting to build socialism, he returned to his capitalist roots and established a distribution network reaching into China and which today handles 20 per cent of all imported wool. Now his daughter, Victoria Lam, has even bigger plans for China Industrial Group (CIND), which enjoyed a 160 per cent increase in net profit for the second quarter to US$6.25 million. By implementing a two-pronged strategy of horizontal and vertical growth, she hopes to turn the company into one of the Pacific Rim's premier distributors. 'Once our market share [of woollen products] reaches 30 per cent, growth will certainly slow. Our real potential for expansion comes from adding more products,' said Ms Lam, CIND's president and chief executive. Recently, the New York-listed company which is based in Hong Kong and which is engaged in the manufacture and distribution of wool, woollen products, chemicals and pharmaceuticals, has been introducing new industrial products into its distribution system at the rate of nearly one a month. That has helped ensure annual growth rates of more than 100 per cent for the past three years. Net income increased from $4.4 million in 1992 to $15 million last year, and turnover rose 169 per cent to top $179 million. CIND, a member of the Hong Kong-based Nimrod Group, formerly operated under the name of Nova Industrial Holdings. Nova Industrial acquired a backdoor listing on the New York Stock Exchange last year after it was taken over by listed company Generation Five Technology. The second part of Ms Lam's plan focuses on ensuring CIND's strength over the long term by increasing vertical integration. The company is negotiating with several international hi-tech chemical and pharmaceutical companies as well as manufacturing companies in China to raise the efficiency of its distribution network and cut costs. According to Ms Lam, CIND will finance the acquisitions with a substantial offer of new shares in the next couple of months and with internal resources. She would not elaborate on the size of the offering. By taking advantage of Western technology and China's cheap labour force, CIND hopes to manufacture and distribute cancer-fighting medicines and industrial chemicals throughout Asia at relatively low prices. CIND already has joint-venture agreements with two factories in China, in Zhejiang and Guangdong provinces, which manufacture finished woollen products for export. In addition, the company owns large warehouses in Shanghai, Tianjin, Guangdong and Guangxi, in contrast to most competitors who must rely on middlemen to store or relay the goods for them. This allows CIND to move cargo by truck and train to 35 regions in China within days. Ms Lam said her company faced little direct competition because few companies controlled a supply mechanism as sophisticated as CIND's. Not only can CIND source and deliver goods in China, Asia, India, Africa and Australia, its two-way trade capability helps it to hedge currency risks by avoiding income loss due to volatile exchange rates. 'With the credit problems in China, more and more people are looking for someone who can provide financing until the cargo arrives, and someone who can deliver it directly so that they don't have to maintain a big inventory,' she said.